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Chapter 2
Relating partnerships to social, economic and environmental indicators

Rationale for a set of principles on mutually beneficial partnerships between corporate and smallholder partners

As Månsson synthesized in the background document to the meeting, CIFOR's recent research set out to analyse two questions concerning whether existing outgrower schemes are mutually beneficial:

By understanding the roles and expectations of concerned stakeholders, and by using a set of principles to measure the benefits of partnership, are the existing outgrower schemes in Indonesia mutually beneficial?

What can be learnt from these schemes and what are the key factors that ensure that they are mutually beneficial and likely to be viable in the long term?

The principles for mutually beneficial outgrower schemes are framed in the overall concept of sustainable forest plantation management (SFPM), and the various international processes of criteria and indicators. A more specific description on the links with initiatives on assessing forest practices and assessment guidelines of mutually beneficial partnerships in outgrower schemes can be found in the Introduction (Chapter 1). The assessment guidelines are designed to be used at the forest management unit level.

Underlying facts: The growing trend for outgrower schemes is an emerging strategy for developing planted forests with multiple objectives. Various research reports have noted that failures to sustain schemes in the long-term were due to a variety of factors including:

Assessment guidelines on mutually beneficial partnerships

Assessment guidelines were originally developed as part of a CIFOR research project to evaluate externally the extent to which corporates and smallholder partnerships have become mutually beneficial. The guidelines presented in this chapter include contributions from all participants at the workshop. The wide use of the application of these assessment guidelines is envisioned. They can be used at three levels: start-up; implementation; monitoring and reassessment and evaluation at the end of each rotation (Chapter 7, Figure 7.2). The authors envision the use of the guidelines in the context of joint action learning (refer to Chapter 3). In this manner, the knowledge, and experience of each stakeholder (corporate, smallholder, research and extension agencies, and NGOs) is appreciated as having a particular role to play in the negotiation and implementation process. The primary stakeholders however are the corporate and smallholder investors. The secondary stakeholders (government, research and extension agencies, NGOs, CBOS) would provide facilitating factors (policy, laws and regulations), empowerment and negotiation support, or technical advisory services. The optimal combination of stakeholder roles will vary from country to country and partnership to partnership. Negotiation of the roles of secondary stakeholders is envisioned as part of the start up phase of any corporate - smallholder business venture. The values of the assessment guidelines are envisioned to be jointly defined by all participating stakeholders. The assessment guidelines, as presented, can provide a generic framework for different stages of the negotiations and implementation of equitable partnerships between corporate and smallholder partners, modified to meet locally specific conditions.

At the end of one rotation (the scheme contract could cover one to six rotations of tree or timber species), the set could be used as a jointly implemented reassessment and evaluation tool to improve the design of the scheme for the next contract term. Such an evaluation tool can assist in addressing the concerns of environmental and advocacy groups and in assuring ecological and social sustainability. Jointly implemented evaluations can be a learning experience for both the corporate and the smallholder partners.2 They may assist in better understanding of community livelihoods and expectations, as well as the technical and delivery requirements of tree growing for specific markets. They may also assist both the company and the smallholders' partners to reassess the contract and re-negotiate points of agreement.

Table 2.1. Application of assessment guidelines at different stages of partnerships



Start-up: identifying prerequisite conditions and negotiationa

checklist to identify the feasible conditions for economic, management, socio-cultural, ecological, and policyd aspects
guidelines to contribute towards developing the business plan at the start-up stage of a scheme

Implementation and Monitoringb

guidelines for monitoring of implementation towards ensuring long-term sustainability
guidelines to assist in the re-negotiation process of entitlements of agreementsc

Re-assessment and Evaluationc

as an evaluation tool to guide scheme improvement and expansion, and to redesign the scheme in preparation for the next rotatione
tools to assist in the renegotiation process of entitlements at the end of rotation cycle

a  The start-up stage covers the processes of: assessing preconditions, feasibility assessment, setting up, agreeing on rights and duties, and preparing the management plan.
b Implementation and monitoring for one rotation under a long-term contract
c Long-term contracts based on concession leases are usually for a period of 43 to 45 years, or approximately equivalent to four or five rotations. 
d Reassessment and evaluation could be implemented at the end of one rotation under a long-term contract.
e It is necessary to assess conducive policies for outgrower schemes from the national to the local levels. However, national level policy assessment is a one-time process.

The essential facilitating tools are the contract between smallholders and corporates, and the Memorandum of Understanding (MOU) between the parties of corporate, local government, NGOs and smallholders. These documents form the basis of transparent and accountable negotiation, contract development, implementation and monitoring.

The applications of assessment guidelines of mutually beneficial partnerships by different stakeholder groups

The four stakeholder groups (private companies [corporate]; NGOs and/or tree grower associations; government; and research/extension agencies) potentially have different key roles in the entire process of start-up and implementation of equitable partnerships. However, these key roles are expected to be complementary for ensuring mutually beneficial partnership between corporates and smallholder schemes. This complementarity was demonstrated in the knowledge shared at the meeting:

NGOs may act as intermediaries in the negotiation process or be contracted by a company. For example, the LIMA Rural Development Foundation (South African) has a role as company representative (contracted by the company) in negotiating contractual arrangements that are beneficial to communities, tree growers and companies. On the other hand, Lembaga Alam Tropika Indonesia (LATIN), an Indonesian NGO, has more a role as facilitator in collaborative management among different parties, such as communities, local government and plantation companies.

From the perspective of the corporate sector, the set of principles, criteria and indicators will be useful to secure their investment, particularly in maximizing the social benefit, and minimizing environmental risks.

From the point of view of national and international research and development agencies and the corporate sector, the set can be used both as a framework for action research and as a guide for stakeholder facilitation.

The government's role in addressing these issues and creating a conducive policy for multistakeholder approaches are often still lacking. Government to be more proactive in setting the rules of the game (policy) with a specific identification of its roles, both under the conditions where the market provides stimulating incentives and when it fails. Acknowledging this expectation, the set will be useful for the government to identify focus areas where support is necessary.

Table 2.2 provides more detail on possible application of the set for different stakeholders.

Table 2.2. Application of a framework for mutually beneficial partnerships between corporate
and smallholder partners

Stakeholder groupsa


Corporate sector

To better plan their investment in developing the scheme
To design a mutually beneficial partnership:
on key components of stakeholder negotiation
on how to work with the community
To design and develop plans with the community
To establish partnership formula for revenue sharing
To anticipate and estimate risks caused by socio-economic aspects
For conducting internal ongoing evaluation

NGO and tree growers' association
(smallholder partners)

To be mediator/facilitator to ensure the scheme will not be disadvantage the tree growers
For empowering tree growers


To identify specific government roles in various stages of start-up/implementing partnership schemes
To identify areas where they can provide support for effective start-up/implementation of the scheme
To be mediator/facilitator in ensuring the scheme will be relevant for government strategic plans and advantageous for company and tree growers

National and International Research Institutions. Research and extension units of private companies

To develop the set of principles on mutually beneficial outgrower schemes based on pragmatic experiences of key stakeholders on the ground; being a partner in facilitating the application of the set by key stakeholders

a The stakeholder groups do not refer to a rigid division of key roles in the processes of start-up/implementation of corporate smallholder partnerships, synergistic and complementary roles according to the principles of participatory action research and social learning are expected.

Revised set of principles on mutually beneficial partnerships between corporate and smallholder partners - relating partnerships to social, economic and environmental indicators

This chapter integrates the inputs from all participants. This has enriched and expanded the set of principles for all aspects of the partnerships guidelines: management, economic, sociocultural, ecological and policy. Participants' experiences had been mostly with management, hence, this aspect had more detailed inputs than others. However, this should not be seen to indicate that the management aspect of the guidelines is more important than the others. The main areas for improvement focused on indicators levels such as:

Policy aspects

Economic aspects

Social aspects

Ecological aspects

Management aspects

Table 2.3. Revised set of principles on mutually beneficial partnerships between corporate and smallholder partners


Principle 1: Policy and institutional frameworks are conducive to partnership and agreement within the framework of sustainable planted forest management



Intersectoral polices that are coherent with the policies on planted forest development

Conducive policies for planted forest development

Other forestry policies that are coherent with forest plantation development policies

Effective instruments for intersectoral coordination on land management with respect to plantation development

Conducive policy on land and crop tenure

Coherent intersectoral land tenure policies at the national and regional levels

Coherent rules on land tenure between national and local communities

Precautionary policies

Regional policies on landscape management and fire mitigation

Principle 2: Government's commitment in supporting the partnership schemes



Simplified bureaucratic processes/requirements

No policy disincentives to growing and harvesting

Capacity, relevance and coordination of government departments

Accessible Legislation and certification for smaller companies

An enabling government policy for all stakeholders

Conducive tax policy

Institutionalizing of the role of mediator/facilitator ("champion agency")

An established national forest industry forum

Clarity of government roles between facilitator and regulator

Catering for different product development needs

Appropriate but not artificial government incentives (e.g. soft loans and tax breaks)

Supportive local and national government

No conflicting policy between central and local authorities

Enforcement, not just policy statement

Principle 3: Transparency and broad understanding of policy



Companies and communities that are better able to understand and utilize policy and other legal instruments

Wide information distribution on laws regulations and policies

A common understanding by all parties to work together on the same policy


Principle 1: Long-term viability of economic objectives of key stakeholders are taken into account



The scheme maintains a commercial focus of key stakeholders' interest, and/or is commercially viable for key stakeholders

Increasing comparative advantages (both smallholders/tree growers and corporates gain fair and equitable benefits)

Available markets for smallholder partners' planted timber

Available markets for company partner's products (realistic choice of products and activities)

Income and land use/mixed cropping diversity options available to bridge the waiting period between planting and timber harvesting (diversified income streams for farmers)

Economic risks are anticipated and forecasted

A certain proportion of revenues from the main wood crops is reinvested to sustain the planted forest and the partnership scheme (an effective reinvestment mechanism)

Adequate definition and identification of community needs

Adequate definition and identification of community costs, especially opportunity costs

Contingency plans (diversifying products to reduce risks, species match site and market)

Absolute clarity of growers on economic implications (risks shared not equally but equitably, both parties prepare to accept risks)

There is a measurement of economic improvement at micro and regional levels

Improvement of market standing by participating corporates

Accessible markets by corporates and smallholder partners

Community members' access to associated income-generation options (e.g. secondary processing and service industries)

There is a monitoring of economic benefits and research results by independent third parties

Benefit sharing that can change with changing inputs

The possibility to renegotiate based on fair accounts of contributed inputs

Accessible information on changes in estimation of possible returns to key partners

Principle 2: Partnerships recognize different stakeholders' power, and create an operational negotiation/renegotiation mechanism



Fair accounts of inputs from both parties as the basis for setting up: benefit-sharing agreement, timber buying from smallholders/tree growers, and cost-efficiency management of small-scale harvesting and processing operations

A fair benefit-sharing agreement for equitable distribution of benefits

A mechanism for economic power-sharing in negotiations

Systems for determining economic shares within stakeholder groups

A fair valuation of stakeholders' inputs

The consideration of non-monetary inputs

Well-recorded economics inputs by both parties with transparent financial records and information

"sweat equity" contributed by communities and smallholder/tree growers,3 considered as valid as "financial equity"

Transparent economic-related information available to all stakeholders or information that is circulated transparently

Accessible market information is accessible to all stakeholders

Tree growers (both those organized on the basis of those producing form communal land, and individual smallholders) with sustainable access to and skills-training in interpreting market information


Principle 1: The implementation of equitable partnerships satisfy social objectives of various key stakeholders



Various social objectives of key stakeholders met and recognized in the agreement to optimize the adoption of equitable partnerships

The acknowledgement in the management plan of wider livelihood objectives of tree growers partner and, if possible, the negotiation in the contract for support for community development

Effective knowledge system established such that individuals within communities are empowered to incorporate their social needs in the negotiation process of agreements and management plans

Long-term land status/rights that have been transparently settled before the establishment of the planted forest and included in the negotiation of the agreement and the management plan. Agreements should not entrench inequities in land tenure and access

Local sociocultural needs of key stakeholders as part of the negotiation process (e.g. those relating to religion, the transfer of the rights of contracted timber to children, and respect of the traditional values of lands)

Acknowledgement in the contractual discussions of the local ethics, cultural, customs and traditions (possible trade-offs)

Monitoring of social objectives clearly indicated in the agreement and management plan

The diverse nature of local livelihoods of tree growers partner is secured and enhanced (buffered from risk)

Schemes provide direct benefits such as products, credit etc.; management plans may also take into account the wide range of livelihood options of a community and its farmers (e.g. on-farm tree species diversity)

Principle 2: Equitable partnership schemes should recognize the difference in power of stakeholders and create an operational negotiation/renegotiation mechanism



Greater equity of power is achieved, if necessary, with support of third parties prior to negotiation processes

Conflict resolution clauses in contract and MOUs with third parties

The possibility to re-negotiate the agreement at defined intervals

Mechanisms to facilitate greater parity between negotiating parties

Strong institutional frameworks are devised and implemented

A special unit in the company to work with both the broader community and individual smallholders (i.e. where appropriate: robust/recognized representative structures at the community level; company staff could improve their skills and performance in smallholder and community-oriented extension services, that are backed up by career opportunities)

Good functioning of grassroots organizations

Institutional development in communities beyond the community and other stakeholders

Fair organizational capacities of both parties

Institutionalized collective bargaining

Resources for capacity-building


Principle 1: There is a mechanism for ecological monitoring



Environmental management plan jointly compiled and implemented

Environmental accountability is enforced and ensured

Sufficient knowledge and awareness among community members of misconduct in managing schemes' plantations

Ecological parameters jointly identified by stakeholders and met before initiation of project

Proper planning, risk analysis and monitoring to mitigate impacts

Balance between social and ecological integrity

Freedom for tree growers ( smallholder and community) to combine multiple land use practices

Principle 2: Ecological integrity is maintained



The ecosystem function is maintained or enhanced

The adverse impacts of planted forest practices maintained within critical limits as defined by regional conservation objectives

Rehabilitation of degraded lands

Species diversity maintained or enhanced at the plot, landscape and regional levels (increasing landscape diversity)

Ecological risks are minimized

Plans for fire prevention

Maintenance of water quantity and quality (downstream water use considered)

There is a freedom of choice of tree planting by smallholders, however in the development of planted forests on communal lands, planting is focused on underutilized lands or degraded lands

Environmental disturbance decreased or minimized (e.g. roads for harvesting and road routing discussed with communities as part of management plan to combine possible social and market benefits of roads)

Positive and negative impacts on wildlife and plant biodiversity taken into account


Principle 1: Fair cooperation is the approach used in the management of the partnerships



Clear agreement among key stakeholders developed through a participatory process

Participatory socialization process (common objectives of stakeholders reached through negotiation)

Simple, effective and efficient contract mechanisms

Agreement that is negotiated, documented and disseminated in a transparent manner

Clear understanding and implementation of the duties in balance with rights as stated in the agreement document (terms of the agreement are respected, agreement negotiated and witnessed with formal and informal village/community leaders' clear rights and obligations)

A clear management plan is designed through a participatory process among key stakeholders

A management plan that is well understood by key stakeholders (clear prioritized objectives, responsibilities of stakeholders and implementation dates; better integrated planted forest management under partnership schemes in local development plans).

more local adaptation of contracts and plans (reliance on autonomy of field staff; management's obligation to deliver on promises; ease of interpretation of management plan to both parties)

A management plan is being effectively implemented by ensuring the development of effective knowledge systems between stakeholders

Knowledge from implementing partners sought and incorporated into the management plan (including company Basic Operation Procedures and market information and indigenous knowledge that is recognized and incorporated into management plans - e.g. soil fertility indicators, pest control)

Communities empowered to formulate their own expectations, requirements and demands prior to agreement negotiations - creation of equal platforms of negotiation (special unit in companies created to work with communities)

Information on management plan that is accessible to all stakeholders

Jointly developed technological and managerial innovations giving rise to new partnership arrangements

Planted forests should be managed to meet market demands (not just to maximize wood biomass)



Mechanisms to ensure transparent and accountable application of agreement and management plan within the community and between partners

Well-documented project plan (implementation dates, responsibilities of stakeholders, and naming of project leader in each stakeholder group)

Clear schedule of monitoring the application of the principles, criteria and indicators of sustainable plantation forest management

Clear monitoring objectives of the management plan on every schedule

Mechanisms for accountability and transparency within the community

Agreement negotiated and witnessed by both formal and informal leaders of the community, including representatives of marginalized groups - women, ethnic minorities, the poor and the landless - (depending on the situation, landless people often have some type of land use rights)

Wide dissemination of agreement and management plan through posters, radio and other conventional mass media in evidence

Mechanisms for accountability and transparency between stakeholders

Mechanisms for information distribution that are programmed and systematic (formalizing links with other key stakeholders such as local and national government and third parties by Memoranda of Understanding [MOU])

Principle 2: Partnerships encourage sustainable management of planted forests



Rules and guidelines of good practice in establishing planted forests that are being adhered to in the partnership

Codes of practice of sustainable management of planted forests taken into account within the management plan

The management plan is implemented following the codes of practice

Available rules and guidance for good practice (both parties understand criteria and indicators of sustainable planted forest management, Silviculture Basic Operation Procedures as part of the contract, species matching site and available market germplasm)

1 Workshop synthesis compiled by CIFOR and FAO.
2 In some cases where land is communally owned, corporates may be engaging in partnerships on a community basis. In such cases specific community evaluation mechanisms, that address concerns of representativeness and transparency, will be required.
3 Although it is envisioned that these contracts are more likely to be entered into between smallholders and corporates, there will be occasion where communities would wish to plant communal land under similarly negotiated agreements with the corporate sector.

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